An Ounce of Prevention

By Joe Molony, Elizabethtown College professor of accounting and senior advisor to the S. Dale High Center

As one who still reads the local papers on a daily basis, I am astounded to see the frequency with which a trusted, loyal employee has been caught stealing hundreds of thousands of dollars from their employers who often are family-owned and operated businesses.

Why does this happen. Are employees just not trustworthy? Well, maybe they are or maybe they aren’t, but even the best of us often succumb to temptation especially when we are most vulnerable and the temptation so easily available.

The point is we owe it to our employees to avoid putting them in potentially compromising situations.

The appropriate cash controls need to be in place. If you haven’t got the right checks and balances in your accounting system, you are inviting that employee to dip into the till should they run into financial difficulties such as unexpected medical expenses, loss of spouse’s employment, or mounting personal debt. Of course, some may be motivated to raise their standard of living with access to easy money. And who can blame them if no one seems to know or care? If you really cared, you would be monitoring the flow of cash.

The saddest part of all is that it isn’t very hard to do. Here are a couple of recommendations for your consideration:

1. Have an accountant perform an annual audit. Just the idea that someone will be checking their work is often sufficient to deter an employee from dishonest acts.

2. Have someone who was not involved with the transaction being paid be the check signer. They should review the documentation and question anything that appears unusual. Involving more than one person in the transaction will require the dishonest employee to gain the cooperation of another employee thereby creating a road block that may also deter them.

These two simple suggestions just might save you enough money to retire early! ( And keep your employees out of jail).